Austria proposes bank tax hike

The Austrian Government has adopted the Tax Amendment Act (Abgabenänderungsgesetz), providing for a raft of tax measures aimed at redressing the public finances, including plans notably to modify and to increase the country's existing bank levy.

The Act provides for the abolition of the investment-based profit tax allowance for securities, for a tightening of the country's group tax provisions, for the abolition of the tax break accorded for so-called "golden handshakes," and for a rise in the bank tax or stability levy (Stabilitätsabgabe).

Welcoming as positive the adoption of the legislation, Austrian Chancellor Werner Faymann made clear that the bank levy forms "an important part" of the law. The measure is designed to ensure a "fair contribution from the banks" to the costs of overcoming the financial and economic crisis, Faymann explained, maintaining that taxpayers should not solely be responsible for settling the bill.

Stressing that Austria already has one of the highest such taxes in Europe, Chancellor Faymann reiterated that this is precisely to make sure that the financial sector assumes its share of the costs involved in bank recoveries.

Chancellor Faymann underscored that the adoption of the law constitutes an important milestone on the way towards stable finances. Here, the Austrian Chancellor insisted that the Government's goal of achieving a structurally balanced budget by 2016 is only to be achieved by taking lots of consistent, individual steps.

Underlining his vehement opposition to the Government's plans to increase the bank levy, Austrian Federal Economic Chamber (WKÖ) member Franz Rudorfer argued that credit institutions in Austria already bear a significantly higher tax burden than their competitors in other European Union member states.

A rise in the bank tax will mean that the fiscal burden on domestic banks will soar to a new record high, Rudorfer pointed out, expressing his criticism that the Government has opted not only to maintain the tax but to increase the charge, given that this is against the backdrop of so many other changes, namely the dramatically tougher own capital requirements for the credit industry, as well as the prospect of a deposit guarantee and resolution fund.

The Ministerial Council has now submitted the Tax Amendment Act to parliament for its consideration. Chancellor Faymann conceded that modifications to the provisions are expected.

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